The world eyes Iraqi oil

EARLY in the Gulf War II campaign, the Arab world's most widely circulated view was that the Anglo-Saxons wanted to grab Iraqi oil. Many Iraqis still believe this, but the theory gets much less attention these days abroad: Insurgent attacks are making oilfields far less attractive to oil companies.

---------------------------------------------------------------------------------- Who will benefit when Iraq reaches its full potential? It is believed to have 112 billion barrels of proven reserves and another 200 billion barrels of probabl4 reserves. -- AFP ----------------------------------------------------------------------------------

Nevertheless, questions about oil are worth keeping alive. As defence policy expert Charles V. Pena of the Cato Institute has put it, 'even if going to war against Iraq is not completely about oil (weapons of mass destruction are much scarier), it's impossible to ignore and even more foolish to think it's not an important factor'.

Moreover, a focus on oil also helps us understand the importance of settling Iraq's troubles. Some statistics underline the desirability of a peaceful Iraq:

# For every new barrel of oil discovered, the world consumes four already-discovered barrels.

By 2010, some experts predict, current oilfields' production will peak, then sharply decline. Oil-conservation activist Colin Campbell of London's Oil Depletion Analysis Centre warns us colourfully: 'The very future of our sub-species - Hydrocarbon Man - is at stake.'

# The most promising source of those new barrels is Iraq. The country is believed to have 112 billion barrels of proven reserves and another 200 billion barrels of probable reserves, a bonanza second only to Saudi Arabia's.

During a recent visit to Baghdad, I found officials monitoring the Iraqi oil industry agreed on one thing - the poor state of Iraq's oilfields. Iraq's technicians were once among the best, but many fled abroad during the Saddam years (1968 to last year). An economy diminished by wars and United Nations-imposed sanctions had also left oilfields with decrepit equipment.

These days, Iraq, which exported 2.5 million barrels a day before the invasion, cannot produce enough oil for its own needs and is a net importer.

Cambridge Energy Research Associates, a Massachusetts-based consultancy, estimates that it will cost billions to return to pre-war levels. Another US$5 billion (S$8.5 billion) to US$7 billion would be required to reach the 3.5 million barrels a day last seen in the early 1970s.

'The need for huge investment in oilfield repair was expected,' one Baghdad-based Western energy authority told me. 'What the coalition administration and the successor Iraqi interim government had not anticipated was the recent slowdown in reconstruction caused by the security situation.'

When Iraq reaches its full potential, who will benefit? The Anglo-Saxon powers who are leading the effort to revive Iraq?

Britons and Americans have involved themselves in Persian Gulf oil for nearly a century, but there are already signs that other nations are working to claim their shares of any future Iraqi oil.

Since the 1920s, first British and later United States companies saw to it that their governments, via their foreign ministries and intelligence agencies, helped them keep a grip on the region's oilfields.

In a recent book, It's The Crude, Dude: War, Big Oil And The Fight For The Planet (Doubleday Canada), author Linda McQuaig claims that these manoeuvres continue. She alleges that US Vice-President Dick Cheney took the lead in moves designed to give US companies control of Iraqi oil.

As Ms McQuaig tells the story, Mr Cheney focused on future oil supply immediately when the Bush administration took office. The Vice-President was fresh from being chief executive officer of Halliburton, the oil-services giant, and in Ms McQuaig's words, 'very interested in Iraq's oil and specifically in the danger of its falling into the hands of eager foreign oil companies, rather than into the hands of eager US oil companies'.

Political activist Noam Chomsky has endorsed the book as an antidote to the oil world's 'deceit, cynicism, racism, sordid manipulation, violence and aggression'.

Despite this predictable hyperbole and the book's polemical style, it contains interesting references to Cheney-led studies of Iraqi oilfields made in 2001 by what Ms McQuaig calls an 'ultra-secretive task force on energy'.

The author charges that a map charting Iraq's massive potential captivated the Cheney team. Judicial Watch, an activist group normally linked to Republican Party causes, forced the map's publication and displays it on its website at www.judicialwatch.org/071703.c_.shtml

Interestingly, China and India, whose energy needs are now growing exponentially, weren't listed. Have the world's two biggest nations missed the boat?

'No,' said that Western authority. 'The boat hasn't left yet.' When Iraq returns its fields to full production, we may expect much jostling in the queue. The Cambridge consultancy predicts oil production of as much as six million barrels a day.

The first signs of that jostling may be seen at Samawa, southern Iraq. Tokyo sent its 1,000-man peacekeeping contingent to this oil-producing area, then paid local tribal leaders a lump sum of US$95 million to 'provide security' for the Japanese soldiers.

The move did not go unnoticed in the US. 'Tokyo sees the 'investment' as more than a simple bribe to ensure that Japanese soldiers are not shot, but rather as the first step towards resurrecting Japanese claims to Iraqi oil,' says Strategic Forecasting, an Austin, Texas-based think-tank. 'The primary reason for cutting the cheque - and deploying to Iraq in the first place - is to revive Japanese economic interests in the region.'

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